Why advertisers are still making space for experimental budgets even with economic uncertainty

Even in the midst of economic uncertainty, advertisers are bullish on experimental ad spend. While ad spend across the board is reducing, agencies are advising clients maintain their budgets to test and learn in channels that are newer, like TikTok, or new to them, like digital video and streaming audio.

With ad spend under more scrutiny than ever, brands should continue looking for cost-efficient and relatively new ways to boost brand awareness, especially as go-to performance marketing channels have proven less effective thanks to data privacy measures. Over the last 18 months of data privacy rollouts from Google’s crumbling cookie to Apple’s iOS 14 update, targeting and measurement have become muddied. The changes have sent advertisers scrambling to find new ways to reach consumers.

They are doing so by testing more brand awareness channels, including ad-supported streaming services like Hulu, YouTube and now, Netflix, TikTok and other media channels. The purpose for maintaining that test and learn budget is to ensure advertisers’ eggs aren’t all in one basket, diversifying media spend.

At Fitzco advertising agency, an estimated 10-15% of client ad spend is typically dedicated to testing and learning. Overall, budgets have been either flat or down 5% across the board. Still, Claire Russell, head of media at Fitzco, says it’s almost mandatory that clients maintain that 10-15% experimental budget to continue testing and and learning throughout economic uncertainty.

“We’re working to try and retain the experimental bucket as much as we can by aligning it to an overarching learning agenda,” Russell added via email. “Even within flat to down budgets, we’ve still seen clients have an optimistic outlook and openness to experimenting.”

In the past, Fitzco clients have leveraged streaming video ads before, but minimally. Recently, they are investing more in platforms such as YouTube, Disney+ and Hulu. (She did not provide exact spend figures). “They want to look at, how do we get different creative in video, how do we spend more [ad dollars] there, how do we start looking at things like brand lift,” she said.

Meanwhile, independent media agency, Ocean Media, is seeing client growth in podcast advertising as well as streaming audio as more consumers use these services, according to Clintton Fleschere, chief client officer of Ocean Media. The majority of the investments are in Pandora, Spotify and iHeart radio network. “What was found was [that], where consumption goes, that’s where you’re going to be able to test out, learn and gain the best learnings,” he said. (It’s unclear what that testing looks like as Fleschere did not provide exact figures.)

Ad spend has slowed across the industry overall as budgets come under more scrutiny with economic uncertainty. This year, eMarketer predicted U.S. ad spend will hit $279 billion, a decrease from its original prediction of $284 billion last March, thanks to inflation, online advertising’s dwindling growth and, of course, data privacy changes. Social media is expected to suffer the brunt of those changes, while connected television will be a bright spot, per the report.

Efficiency over testing budgets

Many clients are looking for more efficiency, but aren’t necessarily wanting to test less or decrease testing budgets. Instead, clients are looking for channels where measurement and attribution is easy to obtain, like audio, which has yet to see slowdown, and video streaming, Fleschere added.

“All of our clients and brands are trying to find those new pockets of efficiency,” said Fleschere. “Whether the KPI is response or awareness, they’re looking for those new opportunities.”

However, experimentation with emerging platforms, like the metaverse, cryptocurrency and virtual reality, are either shelved for now or being narrowly tested during promotional campaigns, holiday marketing or other temporary events. This is mostly due to many unknowns in Web3 and thus, a steep learning curve. (More on metaverse skepticism here.)

“For our brands, they’re going to want to be able to make sure that their dollars are hitting on those that they feel are the most measurable and the best opportunity,” Fleschere said. 

Not everything is going to be right out on a real time basis.
Claire Russell, head of media at Fitzco

The challenge, however, will be convincing clients to not make comparisons between the success seen during the height of the pandemic, online shopping, and thus, digital advertising, and the success of experimental channels today.

“It’s difficult to beat those comps and in turn justify why you’re experimenting at all because it always looks like it doesn’t work,” said Russell. “We’re all attached to real-time, mostly last click performance and it’s difficult to justify some of that brand spend in the downstream impact it can have.”

That’s not to say clients aren’t on board with moving back to experimental brand awareness channels, like audio and streaming. But that is to say it’ll take more coaching and hand holding from agency partners. “Not everything is going to be right out on a real time basis. And not everything is going to be so one to one,” Russell added.

Ultimately, experts say, it’s within a brand’s best interest to continue testing and learning, especially through economic uncertainty, where’s a chance to test and learn early enough to stand out in an increasingly crowded media landscape. 

In an emailed statement to Digiday, Andrew Kasprzycki, Dentsu Creative president of experiences, said, “While traditionally-defined ‘ad budgets’ will no doubt be cut, the best and brightest will shift some of those cuts to drive innovation and experimentation.” 

https://digiday.com/?p=487238

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